The ocean of the world's financial services industry is home to some of the most dangerous predators and the fraudsters who thrive on the damage they do.
The industry's power over consumers is unchecked and strengthening as they continue to dominate the legislative agenda and thumb their noses at regulators.

On this side of the Pecos, we'd have 'em strung up by now, but until then - read on!

Friday, October 31, 2008

The recent trend in squaliforme political influence buying might reverse if Barney and Company bite the hands that have been feeding them. From data compiled by the Center for Responsive Politics, the picture is pretty telling - Da Boss knows where to spend money.

Friday, October 24, 2008

Buried toward the back of the New York Times is an article that some people in Washington and especially some from Wall Street are going to find a bit uncomfortable.

It deals with a warning from some hedge funds who are prepared to take action against servicers that are participating in renegotiating loans without their permission.

William Frey of Greenwich Financial is quoted: “Any investor in mortgage-backed securities has the right to insist that their contract be enforced.”

Frey reportedly said he was aware of two other funds in addition to his and Braddock Financial that sent similar letters to lenders.

David Myers of Braddock Financial trotted out the industry-standard warning about how credit would dry up, saying "...if mortgage servicing firms did not strictly follow those contracts, it would delay the recovery of the credit market because investors would be less willing to buy securities in the future."

And as this kind of thing continues to leak out, maybe someone will wake up and see that Hope Now is mostly window dressing intended to get troubled borrowers to contact their servicer and jump on the fast train to foreclosure.

Friday, October 10, 2008

I know it's 'round here somewhere....it's a big one....huge, actually. It's the only one that has a "NEWS" button. Without it, I can't block the nitwit voyeurs and their panicky messages about the stock market and the talking-heads who are fascinated with voter polls.

It also has a "POL" button that turns off all political advertising. The only problem with that function is nothing appears on the screen for about thirty minutes every hour.

If I have both of them set most of what I see are ads for TV programs.

Tuesday, September 30, 2008

It ain’t pretty. Without allowing Congressional and Senate egomaniacs (many with squaliformes money falling out of their pockets) to put their imprimaturs on it there wasn’t a chance Paulsen’s proposal would wind up as law. And as noted earlier, it had all kinds of truck-sized holes in in.

Hell, if Ol’ Bean sent them the world’s greatest barbeque rib recipe we’d wind up with fourteen platters of mystery meat and avocado-mint ice cream to dip it in.

And there are lots and lots of news media people digging up lots and lots of economists to try and find something to say about all this. Therein lies the problem – economists. As I have told people before, economists are not scientists because economics is not a science at all. It’s a bastard child of statistics and social studies. Some really smart economists will be right some of the time. A gorilla throwing rotted fruit at zoo patrons may even hit someone, too. (Mainly because they both get plenty of chances.)

Richard Shelby (R. AL) even trotted out a list of eminent economists who apparently signed a letter that said the bailout was a bad idea. Most, if not all of them are professors at institutions of higher learning. I noted at least one Nobel Laureate. Shelby, of course, was the Chairman of the Senate Committee on Banking, Housing and Urban Affairs until the Democrats took power and he’s now the Ranking Member. There’s plenty of blame for this debacle that can be assigned to that Committee and now he’s trying to make it look like he’s against helping the squaliformes out of this predicament. It’s their predicament and they’re making it our predicament.

And they have them and us by the you-know-whats. The squaliformes have enough blatant leverage in Washington to literally force the hand of Congress and the Senate. Toss in some political intrigue in the last few weeks of the election cycle and interestingly enough, some of them are more worried about being reelected than they are about attempting to solve the immediate problem.

It will be a squaliforme win. Trust me. There will be fewer of them but the remaining ones will thrive. They always do. And we really don’t have a choice. They will sit on their money and simply refuse to lend it to anyone until Washington gets back in line. And if Washington doesn’t do something, it’s going to get really ugly out here; segments of the economy that have remained untouched by the predatory lending and securitization craze will begin to feel the effect of the squaliformes strangling of the credit market to get their way.

This quid-pro-quo will cost us $700B. If it was handled correctly, we could get some of that back. But then we need to clean house in Washington so they don’t get to come back and do it all again. Any member of Congress or the Senate who has served on the committees that were responsible for financial services legislation needs to do the honorable thing and resign.

Sunday, September 21, 2008

It’s déjà vu all over again. Washington rides to the rescue of Wall Street and their customers. The House and Senate are cobbling together another labyrinthine bureaucracy with only secretary Paulsen as Emperor. Only the players in the rarified air of high finance will know how to navigate – er, I mean manipulate this new Emperor's court.

And of course the finger-pointing is going on at election year warp speed, with the talking heads in the media doing their level best to spread fear, uncertainty and doubt while they try and make it look like they understand any of it.

Let Ol’ Bean make this short and simple – the folks who got incredibly wealthy and have taken this hit aren’t about to just walk away from the gaming tables they’ve been playing at over the years. If Washington wants to keep the financial services casino open (and they desperately do), then Washington will have to cover the gambler’s markers – again.

This legalized gambling-house they called securitization spread an incredible amount of wealth among the players. So much that there was soon more hubris than real wealth. Creativity finally got the better of them.

Now Paulsen thinks they’re going to hand him some “troubled loans” so they can get on with the business of making better loans.

What Paulsen is going to buy aren’t just “troubled loans.” He’s buying (with our money) pools of mortgages at a price that will have nothing to do with reality. And what no one wants to talk about is the fact that the really bad loans are already on the books of the special servicers at huge discounts from their face value. I can see where this will be going:

Paulsen: How much do you want for that pool?

Servicer: $50 million should do the trick.

Paulsen: Ah, well we have to know the cost basis – we’re working under the Credit Reform Act.

Servicer: $50 million. That’s what the pool is worth.

Paulsen: How much did you buy it for?

Servicer: None of your beeswax.

Paulsen: OK. Here’s the $50 million.

Servicer: Thanks, have a nice day.

A few months later Paulsen tries to sell the pool.

Paulsen: I have a deal for you. I have this pool of mortgages for sale.

Servicer: I know. One of the companies I worked for sold it to you.

Paulsen: We’re working under the Credit Reform Act rules for costing. I can sell this to you for $35 million.

Servicer: I’ll give you $10 million. Today only.

Paulsen: But we both know you got more than twice what it was worth when we bought it. You’ve already cleared $25 million.

Wednesday, September 17, 2008

More and more mis-information about everyone seems to be spreading as the data mining squaliformes obtain and peddle whatever they think has a value. Correct or not, as long as you have something to fulfill an information request and the victim can't reach out and find you it's gather, store and sell.

Well, maybe yet another giant leak in the hopelessly leaky dyke of privacy protection will be looked at in this case (08-cv-5250):

IN THE UNITED STATES DISTRICT COURTFOR THE NORTHERN DISTRICT OF ILLINOISSANDRA JEAN CORTEZ on behalf of herself and all others similarly situatedPlaintiff,vs.

1. This is a consumer class action based upon Defendant’s widespread violations of the Fair Credit Reporting Act, 15 U.S.C. §§ 1681-1681x (FCRA). Defendants are Investcorp companies, an investment entity and hedge fund incorporated in the Kingdom of Bahrain. They have taken it upon themselves to supposedly identify -- for a fee -- terrorists, narcotics traffickers and money launderers with whom American businesses must have no dealings. Defendants assemble and maintain a private database of information purportedly about persons on certain U.S. government watch lists, including the list of suspected terrorists, narcotics traffickers and money launderers promulgated by the Office of Foreign Assets Control (OFAC list). Defendants regularly sell their own reports purportedly concerning such persons from their private database to third parties. The reports are used and are expected to be used in connection with ordinary consumer credit, employment, insurance and other transactions. Persons whom Defendants identify in their reports as being on the OFAC list are understood to be legally ineligible to conduct any business in the United States, cannot be employed, cannot receive any insurance or extension of credit, and may even be subject to arrest. Notwithstanding the fact that Defendants are in the business of regularly selling highly critical character and credit information in their reports to be used in daily consumer transactions within the United States, Defendants fail to assure the accuracy of this information or to comply with the FCRA in any respect. As a result, consumers such as Plaintiff Sandra Jean Cortez, who are not actually on the OFAC list or any government watch list, are routinely misidentified in Defendants’ reports as suspected terrorists, money launderers and narcotics traffickers, and thus are considered ineligible for credit or for conducting any business in the United States. Also due to Defendant’s noncompliance with the FCRA, innocent consumers wrongfully identified as being on the OFAC list have no means of discovering, disputing or correcting the erroneous information Defendants are selling about them. In this class action, Plaintiff seeks to represent consumers similarly situated to her who have been misidentified by Defendants in their reports to U.S. businesses as being on the OFAC list, when in fact they are not.

5. Defendant Accuity (Formerly TFP Thomson Financial Publishing) is an Investcorp business entity which maintains a principal place of business at 4709 Golf Road, Skokie, Illinois 60076.6. Defendant SourceMedia, Inc. (SMI) is an Investcorp business entity which, like Accuity, maintains a principal place of business at 4709 Golf Road, Skokie, Illinois 60076, and whose corporate headquarters are located at One State Street Plaza, 27th Floor, New York, New York 10004.7. Defendant SMI owns, operates and controls Defendant Accuity and its operations. Upon information and belief, the executives and employees at Accuity are employees and/or agents of SMI.

II Factual AllegationsA. Defendant’s Sale of Caution and Watch List Reports8. Defendants assemble and maintain a series of caution and watch list screening databases. Through Accuity’s Global Watch List (GWL), Defendants maintain a comprehensive collection of information from all major legal sanctioning bodies, law enforcement agencies and financial regulators from around the world. Defendant Accuity’s database is purportedly comprised of the U.S. Treasury Department’s OFAC list, enhanced with some of the Defendant’s own proprietary sources. This service also includes the NS-PLC (Palestinian Legislative Counsel) list.9. Pursuant to OFAC’s requirements and regulations there is a legal responsibility that financial institutions and businesses exercise due diligence to verify that they are not extending credit or employment, or doing any business with, individuals on the OFAC list.10. Defendants sell reports to financial institutions and other businesses that purportedly help those entities to identify terrorists, narcotics traffickers and money launderers and to thus comply with OFAC’s requirements and regulations.11. Defendants specifically sell OFAC list reports and information to institutions such as Trans Union, LLC, a national consumer reporting agency.12. Defendants sell to Trans Union, LLC and other businesses an OFAC Advisor Alert pertaining to a particular individual, and identifying such individual as being a match to the OFAC list.13. Defendants know that the OFAC Advisor Alert is used and expected to be used as part of a screening or credit background check in consumer transactions, such as credit, employment and insurance transactions.14. By regularly selling such information for a fee with the anticipated or expected use of such reports by the entities referenced above, Defendants operate as “consumer reporting agencies” (CRAs), consumer reporting agencies “that compile and maintain files on consumers on a nationwide basis,” and national specialty consumer reporting agencies (NSCRAs) as defined by 15 U.S.C. § 1681a(f), a(p) and a(w), respectively.15. Among other things, the FCRA regulates the collection, maintenance, and disclosure of consumer report information by CRAs and NSCRAs.16. Despite the fact that Defendants assemble and compile consumer information for sale on a nationwide basis, Defendants will not disclose the same to the American public or the persons about whom they sell reports the contents of those reports.17. Further Defendants do not maintain any toll-free telephone numbers or any other means available to consumers to dispute and correct any errors on the reports Defendants sell about them.18. Importantly, Defendants do not comply with the FCRA’s requirement of following procedures that assure “maximum possible accuracy” concerning the information in their reports.19. As a consequence of their failure to comply with the FCRA in any way, Defendants routinely make mistakes, misidentifying innocent consumers as being on the OFAC list, when in fact they are not on the OFAC list, and further have no procedure for correcting such harmful mistakes.

B. The Experience of The Representative Plaintiff20. Plaintiff is but one innocent consumer who Defendants misidentified in a report as being on the OFAC list when in fact she was not on any such list.21. Due to Defendants’ lack of any procedures to assure the accuracy of the information they sell in their reports, Representative Plaintiff Sandra Jean Cortez was unfortunately misidentified by Defendants in their reports as being on the OFAC list as a known narcotics trafficker.22. Specifically, Defendants sold a detailed Advisor Alert report to Trans Union, LLC in connection with a credit transaction for an automobile that Plaintiff was seeking to purchase and also in a rental transaction for an apartment that Plaintiff was seeking to rent, among other transactions, stating in the reports, among other things, that Plaintiff was on the Government’s OFAC list.23. This is grossly inaccurate as Ms. Cortez has never been designated as being on theOFAC list by the Treasury Department or otherwise, and her name and personal identifying information does not match the OFAC list.24. Rather, there is a Columbian national and suspected narcotics trafficker with the name Sandra Cortes Quintero and a date of birth more than thirty years after Ms. Cortez’s, whose name does not appear on the OFAC list. Defendants’ standard and uniformly applied matching logic has resulted in incorrectly mixing up Plaintiff, and many other innocent Americans with a similar name to Plaintiff’s, with the Columbian national Sandra Cortes Quintero.25. Because of Defendant’s failure to abide by the FCRA in any way, Ms. Cortez has been unable to obtain and review the information that the Defendants are reporting about her, dispute this gross inaccuracy with the Defendants, and ascertain all of the sources to whom Defendants have sold this information and the dates on which such information was sold.26. Defendants do not notify or disclose to the American public or any of the individuals about whom they sell a report as being on their watch lists that they have reported such information. Neither Ms. Cortez nor any of the class members as set forth below are aware of the existence of the Defendants’ identity. It was only through Ms. Cortez’s retention of counsel that she came to learn of the Defendants.27. Because of Defendants’ policy and practice of not accepting disputes or allowing corrections, Ms. Cortez was left without a means to have the Defendants cease reporting inaccurate information about her and has suffered credit, reputational and other harm.28. At all times pertinent hereto, Defendants were acting by and through their agents, servants and/or employees who were acting within the course and scope of their agency or employment, and under the direct supervision and control of the Defendants herein.29. At all times pertinent hereto, the conduct of the Defendants, as well as that of their agents, servants and/or employees, was malicious, intentional, willful, reckless, and in grossly negligent disregard for federal laws and the rights of the Plaintiff herein.

Thursday, September 11, 2008

The FTC’s case against Andris Pukke has netted over $12M in repayment to many of his victims, in part thanks to some diligent work on the part of the court receiver (Robb Evans & Associates) to hunt down assets he attempted to hide offshore as well as with friends and family. Pukke spent a month in prison in May of 2007 for contempt of court for the maneuvers.

But given the fact that the $12M is being divided up among about 287,000 of the nearly 460,000 victims, that means the average recovery is about $42 although the more they paid the more they are supposed to get. (According to an earlier state lawsuit filed in St. Louis, the average victim was charged about $327.)

What most people have forgotten about this monumental scam is that back in May of 1996, Pukke and his wife formed AmeriDebt in the same month he pleaded guilty to mail fraud charges involved in his previous scheme to defraud consumers by falsely promising “debt consolidation loans,” then not providing them. He was sentenced to probation.

In 2001 and 2002, his brother Eriks' company, Debticated Consumer Counseling, another nonprofit credit counseling operation in Huntington, N.Y., dolled out $5 million to DebtWorks. Debticated went out of business in 2003.

Pukke (shown above, at right being sworn in before testifying in Senate hearing in 2004) lived lavishly from the allegedly “not for profit” scheme. In addition to his home in Maryland, in 2005 he purchased a $6.4M home in Laguna Beach, California. At one time he was involved with a land development project in Belize.

If anyone is wondering why there are more and more of these kinds of things cropping up everywhere, one only has to consider the timeline of the Pukke case and the kind of lives they get to live during their run.

This particular Echeneidae Collectoris thrived off of a lot of people who were already victims, and the fact is there is still an endless supply of them being created every minute.

Monday, September 08, 2008

Wachovia has been caught with their hands in the pocketbooks of their checking account customers, this time playing fast and loose with when and in what order items are applied to accounts.

In the suit, filed in Florida seeking class-action status, the complaint demonstrates something most people have seen – when you have overdraft protection the bank will process the larger item(s) first in order to multiply the number of “service” or “convenience” fees.

For example, let’s say you pop the debit card into the machine one afternoon and it shows a balance of $205.00. You pull out $20.00. You then hit the gas station where you’re basically robbed at the pump of $65.00. You still have a balance today in your account of $120.00, right? At least you figure there will still be enough to cover than $95.00 automatic payment for your cable service.

Not really. What you don’t know is the bank is holding three of your smaller transactions (one for $19.50, one for $17.00 and another for 23.00) because the bank’s system knows you have that automatic bill-payment scheduled for $95.00 tomorrow.Rather than process and pay those three small ones and get one overdraft protection fee for the single $95.00 transaction, they will wait until the auto-pay one is done, leaving a balance of $25.00. Then come the three smaller ones which provide them with triple the “convenience fees” and all of a sudden you’re way in the hole. What it amounts to is usurious interest on the advanced funds they paid those three charges on.

Advice – don’t trust the balance you see at the ATM machine and don’t use an automated payment system!

And if you have a checking account at Wachovia and want to get in on the lawsuit, Google “Alters Boldt Brown Rash” the Florida law firm who filed the case.

Wednesday, August 20, 2008

When a uber-squaliforme like C-BASS/Litton Loan is allegedly being scammed using some of the exact same kinds of maneuvers it perpetrates against borrowers, this Judge has to grit my teeth and bite my tongue – sort of.

In what has been going on for many months in the Texas Federal District Court (Southern), a read of some of the pleadings and claims reveals what’s now left of C-BASS (something called “Pledged Properties II”) doesn’t see the irony of having someone do to them what they had Litton do to borrowers all these years.

It’s far too complex to explain the intricacies of property and transfer tax liens here, but suffice it to say, what’s left of C-BASS was making RICO claims against a number of parties that allegedly obtained a foreclosed property with some fast legal(?) footwork that seems to have some of the footprints of how Litton operates against borrowers.

The story starts with a condo owner’s association foreclosure sale in July of 2007 and it degenerates into thousands of pages of legal wrangling over who did or didn’t do what and when. I hope I’m not the only one who see’s the irony in some of these pleadings by counsel for C-BASS:

“By preventing Plaintiffs from obtaining the payoff amount and paying off the transferee tax lien, (Defendant “D”) was able to foreclose the Real Property as a result of the (Defendant “T”)’s “failure” to pay the attorney’s fees and costs within five (5) days. At the foreclosure sale, (Defendant “D”) received $106,500.00 from (Defendant “I”), which equates to a net profit of $94,131.05 from (Defendant “D”)’s wrongful foreclosure.

“Additionally, once (Defendant “D”) sold the Real Property at the [tax lien] foreclosure sale, Plaintiffs’ only hope to redeem the Real Property from (Defendant “I”) was to pay (Defendant “I”) 125 percent of the purchase price or $133,160.00 within 180 days of (Defendant “I”)’s deed being recorded in the Real Property Records of Harris County. See Tex. Tax. Code Ann. § 32.06(k), (k-1). Here, (Defendant “I”) would make a net profit of $26,632.00 by and through the wrongful foreclosure, and Plaintiffs are out $133,160.00 as a result of the entire scheme. Unfortunately, Plaintiffs’ last day to redeem the Real Property has passed during the course of this litigation.”

It’s going to get interesting if and when there is a ruling on this one. If the defendants are anywhere near as clever as C-BASS’ counsel alleges, this won’t be the only case like it, in fact, they infer among the pleadings that the practice is being used against other mortgage holders.

Tuesday, August 19, 2008

One of Countrywide’s senior financial analysts was arrested last month for selling the private information of 2 million Countrywide customers and applicants. Rene Rebollo, Jr., stole the data in 20,000 name increments, pocketing what investigators say is over $70,000 for the data.

One of Rebollo’s customers was paid $4,000 to get 38,000 names from Rebollo, but the ultimate buyer turned out to be an FBI plant that was put on the trail after Countrywide discovered the scheme.

The worst part of this recent breach is that it included not just social security numbers but loan application information, including credit report data. Most of the data was being sold to people in the mortgage industry to use as leads for new loans.

A class-action suit has been filed in the Central District of California (Federal Court) by Finkelstein Thompson, LLP's San Fransisco office on behalf of Edmond and Michelle C. Moses (lead plaintiffs).

As ol' Bean always says, anything you want to know can be bought somewhere.

Monday, July 28, 2008

I’m starting to get more than just a little annoyed at the holier-than-thou crowd and Monday morning quarterbacks in the "news" media who are buying the industry-driven mantra that the problems in the debt markets and the economic fallout are because of mortgage lending to people who shouldn’t have gotten loans.

Trust me – it’s their PR machine at work, diligently trying to shape public opinion and point the finger at the consumers as opposed to the perpetrators. The stakes are high - as in trillions, so you can’t expect the folks who actually run Washington to shy away from getting the media to help them in pointing fingers at easy targets.

And it’s starting to work. Alleged “news” pieces are starting to appear in places other than chatrooms, forums and blogs, citing complaints from people about a bailout – as if the bailout was for the real victims. And lo and behold, “experts” are being drawn on to get the word out in the mainstream news.

But the reality is, any bailout is for the industry and the investors – NOT the borrowers. Most individual borrowers have one home to lose. The industry is facing trillions of dollars of rapidly vaporizing wealth they created for themselves and are reluctant to see stop coming their way.

Tossing ordinary people who have been taken advantage of under the bus is sickening. The industry’s well-crafted defense is taking hold in the media – people are supposedly to blame for taking out loans they didn’t qualify for and then not being able to pay for them.

But those who are hopping on the blame-game bandwagon won’t admit that the majority of people who were taken advantage of were led into adjustable rate mortgages for one reason and one reason only: There was yet another loan in the making; either the borrower would have to refi before the ratchet up or it would explode and be foreclosed on and yet another loan would be created for that property. To keep that machine churning required monumental fraud.

Spare me the “they’re just irresponsible” paintbrush. Yes, some borrowers are. But given who the squaliformes targeted and lured into the sausage machine it is nothing more than financial bigotry to simply say “they shouldn’t have signed that.”Guess what, in a lot of cases they didn’t even sign anything that was legally viable. But that didn’t stop servicers from turning the crank on the manufactured default/rapid foreclosure process, without which the machine would have clogged up and ground to a halt.

And worse, the majority of Americans who didn’t need to worry about fighting the credit scoring debacle sat back and enjoyed artificially low interest rates while the sub-prime victims (many of which should never have been there) drove profits into the stratosphere for the squaliformes and made millionaires among the legalized gamblers on Wall Street.

So give the whining about allegedly irresponsible subprime borrowers a rest - you’re blaming the passengers on the train for the sleeping engineer and the resulting crash.

Friday, July 25, 2008

Is it their political position and isolation from the real world that causes Attorney’s General to make sudden discoveries of old news? Or are we just supposed to assume they are running a few years behind the rest of us when it comes to the Squaliformes operating, or even based, in their state?

After filing suit against Countrywide in June, California’s Attorney General Jerry Brown put on a new song and dance about Bank of America’s newly-owned company just last week – he was “shocked.”

Shocked?Yes: "These shocking new details provide further evidence of Countrywide's dangerous lending practices,” Brown said. He was so “shocked” that he added twenty new charges to the suit.

But what he didn't mention was his sister's position on the CW board.

Shocking!

In 2001, while Mayor of Oakland, referring to the “Don’t Borrow Trouble” educational program Brown said: “Predatory lending is a reprehensible practice. This educational campaign will equip Oaklanders to make better financial decisions.”

Guess what, Jerry - that was PR fluff that you and a bunch of politicians got roped into.

Back in March of 2007, Gareth Lacy, Brown’s spokesman, said the attorney general has an “active and open investigation” that’s a continuation of probes into predatory lending practices that began a couple of years ago – as in 2005. And now, here we are in 2008 and Jerry Brown is “shocked.”

Yea, right. On this side of the Pecos, we'd wire up the ol' 'lectric fence and wrap this allegedly shocked nimrod in it to let 'im find out what a real jolt is.

Tuesday, July 22, 2008

The PR machines and political supporters are busy, scrounging the net and blogs for anything that might be detrimental to a political candidate or a powerful Squaliforme.

Take the first published comment to the previous post. Then take the blog the author points to for what it's worth - they're firing blanks.

Let’s dissect this flimsy public-relations exercise:

Claim 1:“Penny Pritzker had no ownership in Superior. She did not profit or receive compensation, except minimal directors' fees. She and her extended family lost a great deal of money from this investment.”

OK, let’s see just how that works – “[she] and her extended family lost a great deal of money from this investment,” yet Penny Pritzker allegedly had “no ownership in Superior"??? Unfortunately, the author of this fluff piece misses the dichotomy, especially when claim 2 is made:

“She and her extended family agreed to pay the largest amount in the history of U.S. banking to the federal government: $460 million although they owned just 50% of the bank.”

You can’t have it both ways – the Pritzkers either did or didn’t own 50% of the bank and Penny is, after all, part of that “extended family” that “lost a great deal of money from this investment.” If we are supposed to be concerned that they, as half owner, paid while the other half didn't, that was their decision, which brings me to,

Claim 2: “They made the agreement because "it was the right thing to do."

Wrong again – they made the agreement so they would not have to spend years in court and expose themselves and the bank’s management to civil and potentially criminal liability. It wasn't quite the 'get out of jail free' card they expected; it would have been a nearly $40 Million dollar windfall if their and the FDIC's legal strategy against Ernst & Young had worked out the way they had planned.

“Because of these payments, uninsured depositors are expected to receive 80% of their uninsured funds.”

And we are to conclude what from that?Eventually those uninsured depositors are expected to “only” lose 20% of their deposited funds.

And let’s take another look at claim 3:

“When Penny Pritzker was chairman of the Superior Bank board of directors, Superior received high ratings from the Office of Thrift Supervision.”

Wow. That’s a relief. The people asleep at the switch were consistently asleep at the switch.

My “so what” light is blinking, and if anyone believes a Chairman's focus was that narrow I have some ocean-front property over here on this side of the Pecos I'd like you make an offer on before you get to see it. And they didn't 'inherit' poor performing loans - they BOUGHT Lyons and those poor performing loans with their eyes wide open.

"When this was completed in 1994, she left the bank board but did continue as a member of the board of directors of the bank holding company.”

The "so what" light is still blinking. If anyone believes there isn't any control exercised by a holding company over the executives of the companies it owns, I have another one of those ocean-front properties available. Holding company ownership has protections AND privileges, including picking up the phone and holding people you know on a first-name basis accountable for things.

“Superior Bank was required to comply with applicable federal and state fair lending laws and practices. This was the bank's policy."

Ah, yes, the PR mantra of the squaliforme - "we're so regulated we couldn't do anything wrong."

"In addition, the bank's operating philosophy insofar as directors were aware was to follow ethical business practices. Loans and loan policies were overseen by the bank's management, officers, and employees.”

(Emphasis added 1): The magic "I didn't know" defense. I wonder which member of the legal team came up with that one!

(Emphasis added 2): In other words – "we’re not responsible for the people in the company we owned." What part of Board of Directors and holding company oversight responsibilities do you believe they should get a pass on?

“Board members of the holding company, Coast to Coast, were responsible to shareholders; Superior board members and officers were responsible for the bank.”

Now my BS detector is on full. This is one of the stupidest ploys I've seen in corporate PR dances in a long time. Let's see, the holding company owners were responsible to whom? Uh, just themselves. Sure. That makes more sense. And the people they as owners put on the Superior board were responsible for the bank. The owners were more than happy to risk hundreds of millions of dollars and not bother to keep an eye on what was going on. They trusted the Superior board and the officers - they must have; they bailed them out and protected them from further investigation and prosecution via the settlement. Now comes the PR slam, that it was the Superior board members and the bank officers that were responsible. Not the owners.

“Losses related to Superior subprime (whether through foreclosures or to bond investors through securitizations) were minimal compared with losses of other subprime lenders after 2001.”

Allow me to translate: "Someone else got caught and lost more than we did so we're not to blame. Besides, we didn't do anything wrong anyway, remember?"

That's clever - 'no regulatory body has...' that we know of, of course because of the terms of the settlement which bar any such investigation. But at least one court has.

Check out the New York Supreme Court summary judgment ruling in favor of a borrower, noting that LaSalle had engaged in predatory lending.(LaSalle Bank N.A. v. Shearon Case (No.100255/2007, 2008 WL 268449).

Unlawful lending was not widely investigated in the Superior meltdown. It was hardly being investigated at all at that time. It was widely complained of, particularly in inner-city and minority communities but not much was actually being done. It was simply one tip of one iceberg the regulators were refusing to do anything about as the subprime heyday was ramping up and the money flowed into Washington.

“In 2004, Penny Pritzker was named as a director of LaSalle Bank Corporation and federal regulators did not object to her serving on the board of a national bank.”

Wow. Penny got on board with another major Squaliforme (not long before it was purchased by BofA) and the lap-dog regulators didn’t object. We should all be more impressed, eh?

Granted, the authors of the alleged 'facts' about Superior Bank blog are simply doing their job on behalf of the Obama campaign, but until the people who want to be elected to office rid themselves of the wealthy sub-prime squaliforme friends and supporters, they deserve nothing but scorn and even more exposure.

Monday, July 21, 2008

Well Squaliforme champion Phil Gramm's mouth finally did him in, which should improve McCain's chances of being elected this fall. In a typical 'let them eat cake' moment, the Godfather of predatory lending and bank deregulation spoke a partial truth - but it wasn't well crafted enough and revealed the mind-set that permeates the Washington lobby culture. Gramm will have to go back and suffer in his role at UBS.

Now the Obama campaign needs to step up to the plate and dump Penny Pritzker - legendary former owner of the sup-prime predatory lending squaliforme Superior Bank. Pritzker and Dworman (the owners) are still handing out multi-million dollar payments every year to the FDIC (part of the deal where no one had to admit any wrongdoing at Superior).

But the settlement was a pretty good gamble for the Pritzkers. The FDIC went after the auditors, Ernst & Young for compensatory damages in excess of $500 million and $1.5 billion in punitive damages. If the FDIC had gotten two billion dollars, Pritzker and Dworman would have been entitled to almost $500 million under their settlement agreement with the FDIC - without having to spend anything in chasing Ernst in court.

But their strategy fell apart when the courts decided the FDIC (as receiver) and Ernst were bound to settle their issue in arbitration. Instead of $500 Million, Pritzker and Dworman wound up getting only $30 Million back.

$460 Million sounds like a lot of money. But it was $100 Million there in 2001 and the rest of over 14 years, or roughly $25.7 Million per year - minus the $30 Million from Ernst. I won't bore you with the time-value-of-money view but you can bet they did.

But the FDIC paid out roughly $700 Million in the fiasco. And over a thousand depositors in the bank had amounts of more than the $100,000 threshold that weren't covered, so they're out of luck to the tune of $40 Million - their suit against the owners and managers was dismissed in 2004.

So if you feel sorry for the Pritzkers and Dwormans having to pay $25+ Million per year for a few years, imagine how quickly you'd be be behind bars if you ran a company that did what Superior Bank did.

Until regulators and prosecutors show some backbone in the all-too-cozy game of not having to admit wrongdoing, none of this kind of abuse is going to stop.

Sunday, July 13, 2008

I see in news reports that there is great consternation on the hill over the financial industry.

Sorry, but you’re more than a decade late. You had your chance. You’ve been told over and over again that the house of cards was just that. You were content to ignore and even take advantage of the situation.

The people you turned into multi-millionaires were more than happy to help keep you in office all these years while the rest of us have been taken advantage of.Ordinary people funded the whole sordid mess with usurious interest rates and shockingly egregious fees and charges that created jobs and incomes for millions of ancillary company employees. The mutation sucked billions of dollars from people who thought they were supposed to own a home and did little more than lure them into paying more in interest than any other part of their budget.

Others have now lost whatever equity they may have had.

Now when the perpetrators of this scheme are whining you want our tax dollars to bail out the crooks you helped put in business? The chutzpah is staggeringly blatant.

It isn’t and never really was about the “American dream of home ownership.”It was the largest debt-creation and wealth-transfer scheme in the history of the world, and it naturally attracted those who knew how to take even further advantage and used their influence to keep the game going.

Now your creation has been exposed for what it really is and everyone who has anything to do with it is going to be running for cover and pointing fingers. That is if they’re still in the country.

And when the smoke clears and everybody who was on the inside breathes a sigh of relief that the Justice Department decided yet again to look the other way for 99.999% of the perpetrators, the lobbyists will take their checks and their marching orders and will go forth. The game will begin yet again.

Unless we all wake up and toss your sorry asses into the dustbin of political history.

Wednesday, July 09, 2008

If you want to see the true nature of the Squaliformes, here’s another smoking gun:

From SEC investigations into the rating agencies, an email has surfaced that pretty much sums up the whole sordid sub-prime origination, securitization, rating and servicing mess - an email from an employee found in an agency's CDO group quoted his manager as saying that the rating agencies continue to create an "even bigger monster — the CDO market. Let's hope we are all wealthy and retired by the time this house of cards falters."

Thursday, June 19, 2008

Kurt Johnson's loopy tirade against anyone and everyone involved (or not!) in his prosecution took on a really stupid approach by filing bogus UCC documents back in July of 2007, including a "UCC Financing Statement" that described a huge list of individuals as "debtors." From the most recent case (08-02325), the US Attorney's office wants to start by getting an injunction to stop at least some of Johnson's nonsense filings, for example - from the complaint:

15. Upon information and belief, the UCC Financing Statement was sent to the California Secretary of State through the U.S. Mail.

There was another similar one, but if we skip further down in the complaint, the relevant part is:

23. The UCC Financing Statement and the UCC Financing Statement Amendments were filed by defendant Johnson in an effort to establish invalid liens against employees of the United States and to wrongly and maliciously compel the payment of money by these employees.

24. In order to file a UCC Financing Statement, a debt must be owed to the filer and the debtor must authorize the filing of the UCC Financing Statement. See Cal. Com. Code §§ 9502(a), 9509(a)(1).

And he's apparently not done:

28. The UCC Financing Statement and the Financing Statement Amendment pose an immediate and irreparable injury upon the United States of America by impeding, obstructing and impairing the execution of the official duties of its employees or officers.

29. Upon information and belief, unless enjoined, Defendant will continue to file and record false and fraudulent liens and other documents against employees of the United States. For example, the Bureau of Prisons recently intercepted an additional UCC Financing Statement Amendment prepared by Defendant, which lists additional purported debtors, which was contained in an envelope addressed to the Clerk of the United States District Court for the Northern District of California.

And now, drum roll please....

32. Defendant’s conduct, as described herein, constitutes violations of 18 U.S.C. § 1341 (mail fraud) in that he has formed a scheme or artifice to defraud the United States employees identified above and the public by making material misrepresentations, including but not limited to misrepresentations that the employees are indebted to Defendant, have granted Defendant a lien in their property, and have authorized the filing of a UCC Financing Statement. Defendant has used the U.S. mails and commercial interstate carriers to further his fraudulent scheme. Defendant has used the mails in furtherance of his fraudulent scheme with the specific intent to deceive or defraud.

Johnson got an extension of time to reply and that should be as laughable as the other filings he's cobbled together, but all in all it indicates there will probably be more mail fraud indictments soon, and the best part is the case got attached so Alsup will be hearing it!

Monday, April 21, 2008

For those who’ve been ‘round the predatory mortgage servicing bay very long, we recall the infamous “BPO” (Broker’s Price Opinion) became more than just an expense to be passed on to Fairbanks’ victims. In fact, not only was it marked up, many of them came from a Fairbanks subsidiary of another name – Residential Real Estate Review and were then marked up by Fairbanks as if they had actually paid someone for it.

Those fraudulent practices must have garnered the attention of giant squaliformeWells Fargo, because a class-action suit was filed last week in the Louisiana Federal Court for fraudulently created charges for BPO’s (among a few other typically predatory things like mishandling payments).

Given this squaliformes’ size, if a class is certified for trial, one can only guess how many current and former borrowers could see some form of restitution when the settlement is reached.

For those not familiar with how mortgage servicing squaliformes play the fee-stacking game, consider a typical example of how this works and why it works:

BPO’s are authorized in almost all loan documents and can be charged in a situation where the loan is in default, typically when the loan is 30 days late. A payment received past the “grace period” might wind up in suspense while the notice is sent to the borrower, or the servicer may even send the payment back.

In any event, when and if the loan gets to the 30 day late term, it is typically in default and an order to get a BPO is almost automatically generated and a fee charged to the borrower.

Legally speaking, and this can’t be considered legal advice, the servicer can’t mark-up the fees it pays to a third party and thus profit from them, but in practice, they have two ways to get around these laws. First, they can pay the bill as invoiced by the service provider and then for all the business they generate for that provider, they get a kickback, or, as in the Fairbanks and Wells cases, they own the service provider and don’t disclose the fact that they aren’t paying anything on a cash-out per-service-act basis.

This one could be hard for Wells to defend on a fact basis; a Bankruptcy Court Judge has already ruled that Well’s has been charging bogus, inflated fees “disguised as third party costs” in bankruptcy filings, including the rather damning comment that their “management practices are questionable.”

How far back this could reach is going to be something only the court or the settlement can determine; were the case presented here, every penny they ever charged for a BPO would be distributed to the class as should the $1,000 per RESPA violation plus the attorney’s fees.

Tuesday, April 08, 2008

Ohio’s “Compact to Help Ohioans Preserve Homeownership” is being promoted as a first of it’s kind in the US by none other than Governor Ted Strickland; it is indeed a first of it’s kind but the guv is seriously confused about this bit of public-relations fluff.

In the first place, while admitting it’s not legally enforceable, they like to call it “a cooperative step.” Strickland defended any lack of legal standing by claiming: "These companies are putting their honor and prestige on the line."

Newsflash, guv – they didn’t put anything on the line. You can't put up what you don't have. Whoever wrote that for you may actually believe those companies are honorable and have any prestige. That either gullible or ignorant staffer needs to find another occupation – one that doesn’t put his or her leader in a position of playing the fool in press conferences.

The servicers (among them some of the most-predatory companies in the industry and notably without uber-squaliforme EMC Mortgage) crossed their fingers and signed up to “work with the state in making every possible attempt to prevent default loans and foreclosures in Ohio.”

Wink-wink, nod-nod and (drum-roll please) here’s what they will supposedly do:

2. Identify, evaluate and make good-faith attempts to contact at-risk or defaulting borrowers as soon as possible.

3. Modify loans to the extent permissible within fiduciary, contractual or other legal obligations and in accordance with prudent mortgage lending and servicing practices.

4. Create incentives for staff and foreclosure counsel to modify loans rather than foreclose.

5. Report progress to the Ohio Department of Commerce.

6. Enter into a nonbinding agreement with the state for a defined period of time. The agreements extend to June 30, 2009.

Well, let ol’ Judge Bean take a look at those one by one:

Number one is nothing more than meaningless blah-blah-blah-blah.Question: "What the hell is “a substantial and large-scale loan modification effort?”Answer: Anything the servicer says it is.

Number two is something they’re supposedly already doing – the hiccup is that pesky thing known as “good faith.” They indeed may make a good-faith effort to contact the at-risk borrower, but many at-risk borrowers know who they're dealing with and may not want to jump into the water with the squaliforme while they're bleeding from fresh injuries. And of course, if they do make contact, whether the servicer will then act in "good-faith" in trying to prevent a foreclosure is supposedly but inadequately addressed in number three.

Three is where the alleged agreement becomes a complete nullity. That little phrase “in accordance with prudent mortgage lending and servicing practices,” is the problem; the companies are the sole determinants of what those practices are or should be, and prudence dictates staying in business and maximizing returns for the ownership of the company, which among the predatory and opportunistic servicers means defaults and expeditious foreclosures when they alone, deem them appropriate.

Four is interesting because someone is letting it slip that the previous incentives weren’t geared toward what the servicers have been claiming they have been doing all along – trying to maintain borrowers in their homes.

Five is another one of those meaningless statements because there isn’t even an attempt to determine what “progress” is; but whatever they say it is will have to be reported.

"Dear Ohio Department of Commerce:

Progress is good.

Regards,

Servicer."

And the non-binding agreement has an oxymoronic term limitation of a little over a year.

Finally, consider the clause that Litton Loan 's agreement has:

"... is not intended to convey, and does not convey, any beneficiary rights to any person, entity, government or regulatory authority, including, without limitation, borrowers, lenders, investors, counselors or advocacy groups."

If this isn’t just a late April Fool’s blunder, Ohioans should be concerned that their Governor is either a simpleton when it comes to making agreements on behalf of the citizenry or he is a simpleton when it comes to selecting staff members to make agreements on behalf of the citizenry.

Wednesday, April 02, 2008

How long this will remain up and available is subject to speculation, but in order to preserve the Post's rather remarkable exploration of "Big Brother" already at work, consider this old news presented as something new:

Centers Tap Into Personal DatabasesState Groups Were Formed After 9/11

By Robert O'Harrow Jr.Washington Post Staff WriterWednesday, April 2, 2008

Intelligence centers run by states across the country have access to personal information about millions of Americans, including unlisted cellphone numbers, insurance claims, driver's license photographs and credit reports, according to a document obtained by The Washington Post.

One center also has access to top-secret data systems at the CIA, the document shows, though it's not clear what information those systems contain.

Dozens of the organizations known as fusion centers were created after the Sept. 11, 2001, terrorist attacks to identify potential threats and improve the way information is shared. The centers use law enforcement analysts and sophisticated computer systems to compile, or fuse, disparate tips and clues and pass along the refined information to other agencies. They are expected to play important roles in national information-sharing networks that link local, state and federal authorities and enable them to automatically sift their storehouses of records for patterns and clues.

Though officials have publicly discussed the fusion centers' importance to national security, they have generally declined to elaborate on the centers' activities. But a document that lists resources used by the fusion centers shows how a dozen of the organizations in the northeastern United States rely far more on access to commercial and government databases than had previously been disclosed.

Those details have come to light at a time of debate about domestic intelligence efforts, including eavesdropping and data-aggregation programs at the National Security Agency, and whether the government has enough protections in place to prevent abuses.

The list of information resources was part of a survey conducted last year, officials familiar with the effort said. It shows that, like most police agencies, the fusion centers have subscriptions to private information-broker services that keep records about Americans' locations, financial holdings, associates, relatives, firearms licenses and the like.

Centers serving New York and other states also tap into a Federal Trade Commission database with information about hundreds of thousands of identity-theft reports, the document and police interviews show.

Pennsylvania buys credit reports and uses face-recognition software to examine driver's license photos, while analysts in Rhode Island have access to car-rental databases. In Maryland, authorities rely on a little-known data broker called Entersect, which claims it maintains 12 billion records about 98 percent of Americans.

In its online promotional material, Entersect calls itself "the silent partner to municipal, county, state, and federal justice agencies who access our databases every day to locate subjects, develop background information, secure information from a cellular or unlisted number, and much more."

Police officials said fusion center analysts are trained to use the information responsibly, legally and only on authorized criminal and counterterrorism cases. They stressed the importance of secret and public data in rooting out obscure threats.

"There is never ever enough information when it comes to terrorism" said Maj. Steven G. O'Donnell, deputy superintendent of the Rhode Island State Police. "That's what post-9/11 is about."

Government watchdogs, along with some police and intelligence officials, said they worry that the fusion centers do not have enough oversight and are not open enough with the public, in part because they operate under various state rules.

"Fusion centers have grown, really, off the radar screen of public accountability," said Jim Dempsey, vice president for public policy at the Center for Democracy and Technology, a nonpartisan watchdog group in the District. "Congress and the state legislatures need to get a handle over what is going on at all these fusion centers."

Fusion centers were formed in the wake of revelations that counterterrorism and law enforcement authorities missed or neglected evidence that the Sept. 11 attackers were in the United States while preparing to strike.

Because they are organized by the states, the centers have developed in different ways. Some are small operations focused on crime, while others are full-fledged criminal and counterterrorism operations. From 2004 to 2007, state and local governments received $254 million from the Department of Homeland Security in support of the centers, which are also supported by employees of the FBI and other federal law enforcement agencies. In some cases, they work with the U.S. Northern Command, the Pentagon operation involved in homeland security.

The centers have been criticized for being secretive, but authorities said that this is largely for security reasons. Activists want to know more about their activities, the kinds of information they collect and how the information is being used.

The Electronic Privacy Information Center filed a lawsuit in Virginia last month seeking the release of records about communication among state fusion center officials and the departments of Homeland Security and Justice. Marc Rotenberg, the privacy center's executive director, said his group was responding to a proposed state law that would sharply limit access to records about the fusion centers' activity.

Sue Reingold, deputy program manager in the Information Sharing Environment office, a federal operation with a mandate to improve information sharing, said state and local officials "must have access to a broad array of classified and unclassified information" to perform their mission. But Reingold said that an "important part of this is appropriate training and oversight that is well understood and transparent to the public."

"Fusion centers are vital to state and local efforts to fight crime, including terrorism," she said.

The list includes a wide variety of data resources along with software that finds patterns and displays links among people.

Most of the centers have subscriptions to Accurint, ChoicePoint's Autotrack or LexisNexis. These information brokers are Web-based services that deliver instant access to billions of records on individuals' homes, cars, phone numbers and other information.

Some of the centers link to records of currency transactions and almost 5 million suspicious-activity reports filed by financial institutions with the Treasury Department's Financial Crimes Enforcement Network.

Massachusetts and other states rely on LocatePlus, an information broker that claims that it provides "the most comprehensive cell phone, unlisted and unpublished phone database in the industry." The state also taps a private system called ClaimSearch that includes a "nationwide database that provides information on insurance claims, including vehicles, casualty claims and property claims," the document said.

The center in Ohio has access, through authorized users, to an FBI "secret level repository," the document said.

Rhode Island reported that it has access, also through the FBI, to "Top Secret resources" such as "Proton, which allows queries of CIA databases," the document shows. Officials at the Rhode Island State Police, FBI and CIA declined to discuss the system and the kinds of information it contains.

In addition to databases run by Entersect, Maryland fusion center analysts have access to wage and property records, corporate charters, utility records and a host of government files, including criminal justice information and traffic tickets. Jason Luckenbaugh, the center's chief of staff, acknowledged concern about the government's ability to tap into new sources of information. But he said the databases enable analysts to fight crime and protect against terrorism, and help local authorities do the same. "We're not trying to threaten them in any way," he said.

Once again, we can say goodbye personal privacy. This tip-of-the-iceberg realization by the Post is far too little too late to stem the tide.

Tuesday, April 01, 2008

In response to the deepening problems of the investment banking industry, the nation’s top economic thinkers issued a formal set of proposed “Economic Recovery, Realignment and Operating Rule Standards,” promulgated by the President’s recent series of “International Debt, Interest and Optimized Trade Summits.”

Secretary Paulsen, who sent key staff members to the hastily-gathered meetings of major investment bank leaders and market experts, was quick to praise the results, saying, “The ERRORS will send a message to the financial community around the world that this country is stronger than the press would have everyone believe.”

He added that there will be another series of IDIOTS “…sometime in January of 2009.”

Monday, March 17, 2008

No less than Forbes magazine used to rate Bear Stearns among the “most admired” businesses in the country.

How that most-admired status became worth only $2 per share is going to be made more clear in the future, and a good part of it is going to come out in the conflagration of lawsuits that are only now being ignited as angry shareholders howl and lick their wounds.

To say that Cayne (CEO) and his henchmen didn’t see this coming is ludicrous; yet apparently they didn’t take steps with their own holdings to avoid massive personal paper-wealth hits and the company didn’t have golden parachutes for major players.

But as one of the key enablers in subprime mortgage securities, and in owning one of the truly predatory mortgage servicers (EMC Mortgage), Cayne and the directors had to know their scheme could only run so long. Or did they?

We may eventually get answers to the classic: What did they know and when did they know it?

Let’s face it, in 2005, 2006 and 2007, EMC Mortgage’s management was reporting something up through the ranks to Bear’s management. There had to be either signals of impending doom or over-confident fluff moving up the food chain about how quickly the toxic waste dumps could be cleaned up through aggressive loss-mitigation (read: rapid foreclosure) practices. Clearly, while not all of Bear’s portfolios were serviced by EMC, being among the most predatory of special servicers, they should have provided Bear with insight into what could or couldn’t be accomplished by the handful of companies that do the highly-profitable waste-disposal servicing in the subprime arena.

And it may have had that insight. But it seems more likely that the board was getting the fluff version of the story from within the ranks. Either that or we would have seen a lot more action on Bear’s shares from the major players who were in the know.

And that version of the theory makes sense when you consider the culture that has been allowed to thrive at servicers like EMC: Never, ever admit a mistake.

The sudden and stunning collapse of Bear’s value may indeed reflect that culture was being rewarded right up until the bitter end.

Friday, March 14, 2008

What we can learn from the Fed Chairman’s recent calls for reductions in the principal of troubled mortgage loans is that he knows little or nothing about the reality of life faced by subprime borrowers.

Hello, Ben – the problem isn’t the principal – it’s the interest.

You’ve adopted the theory that being upside down in a loan makes it so a borrower will want to walk away because they think there’s no equity to lose.

Hello, Ben – the problem is they can’t afford the payments because of the interest rates they got slammed with. They would like to stay living in the house. It is their home. You’re not helping them keep it and foreclosure is the servicer's best financial option.

Have you played with an amortization calculator lately, Ben?

Try a simple one, just to learn how people in the real world see things:

After 24 months at that rate, $4,155.25 has been paid into principal. $16,285.16 has been paid in interest. The principal balance is now $145,844.75.

Then the ARM’s interest rate jumps to 11%, so the new payment zooms to $1,379.68, which is $528.00 more per month for the borrower who is already trapped or would have refinanced.

Let’s say Ben’s goofy idea to lower the principal is acceptable to the noteholder (if you can find one!). And let’s knock off 20% of the principal ($145,844.75 becomes $125,844.75). Guess what the payment is now? $1,189.22, which is still $337.54 more the borrower would have to pay per month that they probably don’t have.

And worse, at 11% APR, the borrower is now faced with over $303,000 in interest for their $150,000 loan instead of $130,000. That's still a good deal for the investor, Ben.

Wake up, Ben. The problem isn’t principal. The problem is USURY. Plain and simple. Subprime lending is a usurious, predatory scam, Ben and until you admit that the interest rates are the problem, you’re only perpetuating it.

But anyone with a subprime loan should be able to figure this out too. Anyone who has half a brain should walk away because they’re being scammed by usurious interest rates, not because they’re upside down or close to it.

And if enough of the victims do the smart thing and walk, the subprime industry and your friends on Wall Street will get even more of what they’re getting, and they richly deserve it.

Wednesday, March 05, 2008

Back in January of this year the New York City Comptroller, William Thompson and the New York State Comptroller, Thomas P. DiNapoli and the New York City Pension Funds became lead plaintiffs in a class-action suit against Countrywide and certain officers (as well as a host of other related defendants) alleging that Countrywide misstated and omitted information regarding its lending practices and other business information, resulting in the artificial inflation of its stock price. Well, we all know what has happened to Countrywide and it's stock value. And a lot of us cheered.

But given the amount of information that is, was and has been out there about Countrywide’s predatory lending and servicing practices over the last several years, what on earth were Thompson and DiNapoli and their pension funds thinking?

Something tells this Judge that NY's participation in the suit should be thrown out under the doctrine of unclean hands; anyone who invested in Countrywide had to have been deliberately ignoring the enormous public outcry regarding subprime predatory lending. And the only possible reasons to have done that are either opportunistic gambling with NY pension funds in Countrywide’s routine abuse of borrower consumers or alternatively, gross ignorance and incompetence. There really can’t be any other position from which to complain, and either one means Thompson and DiNapoli should have nothing to do with managing anything more complex than a lemonade stand.

Any pension fund or investment manager that touches the stock of companies like Countrywide deserves whatever happens to them.

Friday, February 08, 2008

If there is any one thing that is more irritating than fire-ants, it’s the obvious lack of understanding on the part of news media reporters and their willingness to parrot the public-relations line of the financial industry and certain politicans.

Over and over again, the “problem” of subprime lending is defined as something that must be laid at the feet of “borrowers with less than perfect credit.”

This magical reversal of the laws of reason is akin to being able to push a rope and have something happen at the other end. For those who can’t seem to make this journalistic alchemy work for them, it is more than just frustrating to see Washington, the US Attorneys Offices and Attorneys General throughout the nation get very excited about CDOs, SIVs, hedge funds and the losses on Wall Street while deliberately ignoring the millions of civilian victims of this massive scheme.

The media is more than happy to keep ignoring the real victims. They like to differentiate themselves from the “people with credit problems” by repeating the discriminatory smear as if it were fact.

The fact is, some number of people who shouldn’t have gotten abusive loans got them. A small percentage of those knew they were on thin financial ice but went ahead anyway. But the vast majority of them were set up to pay usurious amounts of interest and are still, even as I write this, making their payments. And they're suffering as a result.

What we’re really seeing is what I call “wealth recapture.” It’s reverse wealth-distribution; Washington likes to take from the rich and give to the poor. In response, the rich figured out how to get it back from the lower-middle and middle classes through the mortgage and credit-card industry and a hopelessly-fraudulent credit-scoring schema that was used to artificially inflate interest rates. There were enough people in Washington who were willing to see the duplicitous nature of the system but not do anything about it.

What most people don’t realize is the roots of this problem can be found with just a little research. Once the industry succeeded in getting rid of usury laws, the game began. And any potential interference was quickly thwarted by among others, one very powerful Senator, Phil Gramm of Texas. With all the warning flags being raised about predatory lending years back, it was Senator Gramm that blocked any meaningful controls with his ‘you can’t regulate it because you can’t define it’ nonsense.

That effectively cleared the playing field of any defenders and the birth of the monster was at hand. The money flowed like water and large amounts of it went to Washington in both campaign contributions and lobbying expenses.

Millionaires were created by the thousands. All while the average person loaded themselves up with exorbitant interest debt because, conveniently, the game was rigged to provide a tax deduction for it, and still is in terms of the mortgage industry.

There was so much money made so quickly that they got even more creative with it. Too creative. And this creativity has come home to roost – for the gamblers who thought they had the game rigged, that is.

But they couldn’t have rigged the game if folks like Phil Gramm hadn’t been willing to protect them early on and folks like Bob Ney weren’t there to cheer them on in the early part of this decade. (Gramm is now with UBS Investment bank and is an economic advisor to John McCain. Ney is serving time.)

Yet we still have the news fools lapping up the industry PR flack’s line about “loose lending standards” being the root cause of the debacle, without finishing the sentence, which should read: “Loose lending standards designed to entrap as many people as possible."

Then there’s the “call your lender if you think you’re going to have trouble with your payment,” dogma. What that provides for most people who’ve already been abused is a quicker ticket to hell. Instead of a bus, you’ll be on the next plane to moving out of your home. First, the servicer they’re supposed to call is the only party who stands to actually make money in the foreclosure process. Everyone else loses, especially the borrower. Worse yet, the alleged workout deals will effectively shield the lender and servicer’s illegal and fraudulent acts.

“You want a lower payment?”

“Yes.”

“Here, sign this.”

“But it says I can’t sue you for the violations of the law you’ve already engaged in or might engage in in the future.”

Wednesday, January 09, 2008

Sometimes along side the aforementioned (below) band of ignorant (or deliberately foolish) tax protesters and dodgers are their less risk-taking, like-minded, self-interested brothers and sisters who choose to go unarmed into battle with various financial entities with what really are nonsense theories. A lot of these share the same fundamental theoretical roots but there are fewer convicted perpetrators.

What they think they’re armed with, the sure-fire “process,” to get out of debts without paying the creditor is rarely anything more than a revamping of old schemes that have never worked before. Apparently they seem to sound impressive in new prose, but attempting to use any of them dooms what might be an actually defrauded borrower from prevailing in a legal setting. And frequently, they steer actual victims away from legitimate legal counsel.

All of these schemes share some commonalities, including several legal mythologies and various forms of allegedly complex conspiracies mixed with secrets the public isn’t supposed to know. Stir in some suspicion for the evil motives of the powers-that-be, add a pinch of questionably interpreted legal lexicon and you have a product for a receptive target market.

Another thing the schemes share is a sort-of family-tree of promoters, some of which are associates or acolytes of convicted criminals and others that just haven’t gotten into the range of the prosecutor’s radar. Their like-minded genealogy can be traced to the disaffected, conspiracy-driven, anti-establishment community which includes the more radical so-called “patriot” movements and some seriously dangerous even further-out-there groups.

Those foolish enough to take on the IRS are the most exposed to prosecution and their names show up in newspaper stories from time to time while few of the debt-elimination scammers warrant anything other than being outed and derided on the Internet, or in the case of the Dorean Group, a handful of articles in trade news outlets.

Few of the participants are doubly-stupid in today’s information-rich environment, thus we probably won’t see another attempt to use a “UCC / strawman /ALL CAPS NAME / redemption” scheme to thwart the IRS unless someone is working from a really outdated hardcopy source they found among someone’s dusty piles of cheaply produced self-published books. But credit card companies, as utterly abusive and out-of-control as they are, probably get dozens of nonsense letters every day from rookies who Googled their way into a trying (or worse, paying someone for) a process for getting out from under their crushing debt without having to actually pay it. Instead of winding up with no debt, the hopeful debtor learns a harder, more costly and disappointing lesson in how the law really works. And if they had the misfortune to have paid one of the scammers, they eventually discover the doctrine of unclean hands prevents them from bringing any kind of viable civil action.

Because of the Internet, there seems to be no end in sight to the reuse of the same root mythologies, half-truths, tortured logic and context-mangling cut and paste quotes and citations. Web sites are so easy to launch and links to others so easy to implement that anyone with average skills can put themselves into the debt elimination business almost overnight. All you really have to do is blend some number of the old theories into a slightly different, seemingly-coherent message as if there’s a new and improved theory to get paid for.

Finding a new angle will help to differentiate you but plowing overly-creative new ground will take inordinate amounts of your time. And keep in mind there are limits to the beneficial effects of being really creative. Some who peddle nonsense like Paul Andrew Mitchell, David Wynn Miller, David Merrill Van Pelt and Shaini Goodwin have wandered so far off into lala land that even the less-than-knowledgeable reader will shake their head and worry about all the people in this country who can’t get proper medical attention. Others like David Icke are clearly selling nothing more than an entertainment product and are compellingly goofy enough to even get overnight radio promotion time. So making new stuff up, while seemingly easy, can backfire in terms of the numbers of prospective paying customers for a debt elimination scheme.

So, here are Judge Bean’s tips for setting up a debt-elimination scheme:

- It’s probably a little too soon to revive some of the scams, so do your research. For example, mimicking the Dorean Group's highly-complex scheme would be problematic; they’ll be sentenced about the time you get your first web pages published. But there are parts of it that sound so mysterious that it will easily fool some people. Also, the Bill Of Exchange (BOE) thing is a little too hot for a while what with Barton Buhtz 's recent conviction. The private arbitration company thing has proven to be a major loser, too. Then again, your customer base probably doesn’t know or believe any of that, but choose carefully or wait until the stories die off into Google’s later pages before you ressurect another one of those.

- As far as content goes, first and foremost, you need to establish a shared evil opponent, so you have to include mysteries about banks, money and the Federal Reserve. If you don’t like the ones that are out there, feel free to embellish or even rewrite history. Adding things about the IMF and the NWO is nice fluff to fill out some space.

- Try to avoid addressing the issue of accepting FRN’s even though you have to say they aren’t real money.

- Remember “international bankers” sounds more devious than just “banks.”

- Spin in plenty of legal-sounding phrases about promissory notes, bank credit, assets, balance sheets, GAAP and the all-important “wet-ink" signature. - Assert that you have a team. You have experts in, well, whatever suits your fancy just as long as there are initials after their names that imply credibility.

- Dig up the Credit River myth or at least provide a link to a site that does, but make sure you choose a web site that doesn’t include the whole story.

- Sovereignty isn’t really a big attraction for your average, apolitical, non-fringe element borrower in trouble, but it does give you street cred with the protest-minded. If you decide to tap into that market, remember to use the word “jurisdiction” a lot.

- Be sure to include statements throughout your site that comfort the prospective customer/co-conspirator’s conscience, i.e., assure them your process is “moral.” But don’t stoop to the “it’s moral because the bank screwed you” ploy; you’ll scare off some number of viable prospects. If you’re really creative and your customer base is really gullible, you might try some version of Freedom Club USA ’s “everybody wins” theme.

- Save yourself some time and just replicate one of the UCC strawman packages – the stuff about the ALL CAPS name. (Don’t worry about copyright issues; those will be the least of your problems.)

- Toss in something about why attorneys can’t be trusted because they and the Judges are all part of the BAR.- If you’ve got the time, resources and verbal delivery skills, have weekly one-way conference calls where you can sell by expounding on the wonders of the plan and the progress being made. It’s a long-distance call for them, so keep it short and sweet.

- If you’re really slick and fast on your feet, “open” the above-referenced call up to questions but be sure you’ve authored them and they’re presented by trusted parties. Try to use people who can ask them without sounding like they’re reading.

- You will need to make up a number of anecdotal and impossible to disprove testimonials from allegedly satisfied, debt-free customers. Don’t make them extravagant but don’t worry about misrepresentations; the FTC would have to have thousands of complaints about you to even look at your website.

- If you really want to have credibility with the furthest fringes of the gullible, mention things about Admiralty and the gold fringed flag (no pun intended).

- If you’re going to use it in your process, at least try to be original with the words you put in front of “Administrative Remedy.” Private and international have been overused and putting in the Admiralty after it has lost a lot of allure.

- Use an invisible hit-counter for your own information but put up your own self-set numerical display to show huge and growing numbers of visitors.

- Now, if you’re really trying to tap into the truly zany realms, you’ll have to put in some links to the other-worldly kinds of nonsense.

- If you’re into the MLM thing and can lead others into it, you might be able to put together a network marketing scheme to get other people to sell for you. At least with this angle, you can get some initial revenue for setting up a web site for each of your marketers and their down-lines.

- Don’t get greedy; this is a business that lasts between a few months and maybe three years if you’re really slick and careful. Better to take the money and disappear than to wait too long and lose it all.

- Finally, get ready to do battle on Internet forums to promote your program, trash your competitors and demean web sites like Quatloos.com and Scam.com. You’ll need to be able to pose as completely different posters; some people, including moderators, can smoke out shills and spammers who don’t know how to conceal their writing style. You need to be creative in broaching the subject on a forum for the first time. Most rookies come off looking really lame with the “Has anyone heard anything about the XYZ program?” kind of thing. Having multiple IP addresses is critical for this part of the business. You may want to revive that old dial-up thingy and sign up with a couple of low-cost ISP’s. Anonymizers aren’t all they’re cracked up to be and some sites won’t let you post if you’re using proxy servers.

Which brings me to the Internet playground known as suijuris, more specifically, the forum. This is a two-edged sword but you’re probably going to have to deal with it. “The Law Research Group” maintains the web forum and many of the visitors are among your target demographic, but many are also more than willing to share snippets and advice that will conflict with your sales opportunities or steer prospects away from paying for your program. A few visitors will be people who are in the middle of a financial death spiral who get all kinds of goofy advice and wind up bemoaning the corruption of the courts and attorneys when what they were doing was tossed out of court for perfectly legitimate reasons they will refuse to understand.

But the suijuris forum can be highly instructional in developing your version of the scheme. Some posters will unintentionally reveal flaws in some process and other visitors will chime in and explain what they did wrong.

There you go! Have fun boys and girls! (Can’t wait to see your new-fangled super-duper hottest-thing-since whatever process show up on Google.)